Next Generation Supply Management Defined

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Daily Archives: December 1, 2016

You have to support Procurement because this is the next big thing78. You might still be engrossed in the ad-driven world created by the marketing mad-men that can drive mega-sales when done right, but face it, there is only so much revenue to be gained from incremental sales with a 3% margin. But Procurement, this is the real low-hanging fruit74. Sales would have to double to add the same amount to the bottom line as Procurement could add if it simply took an extra 3% off of the lifecycle cost for a product with a 3% margin. Given that Sales doesn’t have the bandwidth11 to double sales, and Procurement always has the bandwidth to shave off a few percentage points on the right categories, the choice should be obvious.

Let’s face it, you need a few quick wins75 — and what better place to get those wins then with a new initiative that can deliver real ROI5 with relatively minimal investment. In fact, Procurement is a cash cow25 that is typically undernourished and one, that if it dies of starvation, could take the business with it. Face it, it’s the one part of the business whose primary focus is to not leave money on the table.

Yes, you need to be a team player8 with more than an open door58 policy. You need to tear down the silos internally47 to get things done, but remember, it’s all about synergies26 and you are a self-proclaimed agent of change42. Plus, once costs are under control, data driven2 Procurement will go back and sharpen their pencils, think outside the box10, and when more immediate savings are not immediately identifiable, focus on value-add63 and look for ways to get more for less.

Maybe you have to manage the optics18 of what you do, and maybe you will need to initiate some creative destruction19, but the savings and value generated are scalable61, applied to every unit. Best-of-breed62 organizations are best in class in Procurement. (In fact, every year they will take at least 4% to 6% off of the entire bottom line when properly supported. That’s a huge number!)

In fact, Procurement can bring about a paradigm shift1 in the organization. It might be tough to wrap your head around3, but it’s true. We can ballpark the opportunity6 easily. Going back to our example above and peeling the onion87, if the category sells 10,000 units at 100 each, the organization takes in 1,000,000 in revenue and makes $30,000. If aggressive marketing could increase sales 20%, the profit would be $36,000. But if Procurement, with the same investment, could decrease costs by 3%, the profit would be $60,000. How could you not want to run with this89?

We realize we’re not quite comparing apples to apples86 here, but at the end of the day32, if you step up to the plate27, square the circle24 between organizational units, it will be a win-win4 for everyone and no one will be stuck putting lipstick on a pig34. When you cross the chasm14 and sail into that blue ocean14, the bottom line will go from good to great14 and inflate as you pass the tipping point14 and you will definitely want to run with it89.

And if you don’t think it will move the needle48, we have four words for you: Supply Chain Top 25. Deal with it.21 You don’t need to do a SWOT analysis30 to realize that the answer to the 64,000 question23 that if you want to monetize29, the fastest way to increase profit is decrease costs. It’s a strategy that is more than actionable enough53, one you should incent41, but the net of it is13 you will come out ahead. When the rubber meets the road12, results oriented36 Procurement wins. So, going forward57 be a visionary7 and support Procurement. My 2 cents is54 that if you give Procurement the support they need, you can phone it in88 and still win big.

A big shout-out to Eric Jackson of Ader Investment Management who took the time to compile the brief dictionary of the MBA language for the rest of us who like to stay in the trenches90.

Also, if you select text the last two posts, you will see that we used every key phrase of the MBA language, so this should help you, as a practitioner, get their attention.